We are a couple of weeks into the new year, and life has settled back into a routine, making it a perfect time to re-evaluate your budget and financial goals. Today I am going to share with you a few essential yearly budget to-dos you can address in the next couple of weeks.
Why Yearly Budget To-Dos Matter
You might be thinking to yourself, “I have a budget what does it matter?” or “I’ll just keep going along with what I have now.”
Each of those is a good thought but unfortunately, expenses, life, and financial status are ever-changing and therefore it would be irresponsible and detrimental to your financial goals to not reassess each year.
This is the time to look over every aspect of your spending, your income, your savings, and your debt and reevaluate what and how you want to use your money over the next year.
Important Yearly Budget To-Dos
1. Review Your Income
Often times the end of the year can mean a raise for employees. If you or your spouse received a raise at the end of last year, now is the time to make a plan for that additional income. Make sure you calculate the total estimated income you will have each month so you can budget accordingly.
2. Assess Your Fixed Expenses for the Previous Year and Add New Expenses
Now that you have a full year’s worth of data it is time to update your budget for your fixed expenses. As a reminder, your fixed expenses include your unchanging monthly expenses such as electric, gas, mortgage, and more.
Take this time to calculate the average amount spent each month for these expenses and update your budget if necessary. For many families across the world, there has been an increase in the cost of these expenses.
During this time also add in any new fixed expenses. Have your children joined a dance class that bills monthly? Add it here. School tuition or student loans now up for repayment? Add those here too!
These expenses are going to be the most important expenses in your budget so making sure you have the funds to cover them is important.
Related: Fixed vs Variable Expenses
3. Compile all Your Annual and Monthly Subscriptions
It is so easy to say yes to a subscription and then forget about it. This means you’re paying money for things you’re not even using! Take some time to review your spending and make a note of all subscription services you have. Don’t forget television streaming such as Hulu, Netlflix, or Peacock. There are upgraded music streaming services such as Pandora, gym memberships, drink memberships, phone data plans, and more!
And if you’re a small business owner, don’t forget about all the services you’re using.
Take some time to really consider how frequently you’re using these services and if canceling some of them might be worth the savings.
4. Assess Your Variable Expenses and Adjust as Needed
Now that you’ve had a chance to assess your fixed expenses, it is time to take a look at your variable expenses from last year. Hands down the best way to do this is to review your spending by category throughout the last year.
If you’ve been following along with me for very long you know that I am a huge advocate for monthly expense tracking. This method involves taking time each month to keep a record of every single thing you purchase.
This might seem like quite a bit of extra work but truthfully there is no better way to truly learn your spending habits. And once you get into the habit of checking in on your finances weekly, budgeting this way becomes so easy.
If you tracked your spending last year, take time today to decide what areas need some TLC and adjustment. In our family, I discovered we were eating out more frequently than I had planned. Therefore this year I will be keeping an extra eye on our eating-out budget.
Depending on your previous year’s spending, you may or may not need to adjust your budget for the next twelve months.
5. Set Up or Update Sinking Funds
Every family has yearly recurrent expenses that, if we don’t plan for them, can destroy our budget. If you do not yet have sinking funds, now is the time to get them started. [click below to read more on sinking funds and start yours]
For those that have sinking funds, now is the time to see if the values you have budgeted for are still working. Update your sinking funds as needed. This may mean reducing the number of sinking fund categories, adding sinking fund categories, or simply adjusting the planned budget for each.
6. Review Your Debt
Assessing your debt every 6 months is an incredibly important budget to-do. It is vital that you are staying tuned into what you owe in the world. Take time to make a list of all your debts, including credit card balances, student loans, car payments, and mortgages.
Once you have your list, it is time to make a plan for repayment. If you have extra funds in your account consider putting them towards outstanding debt. When you’re making this list, consider any debts that will be paid off in the coming months. Make a plan for the funds you will have after that debt is paid off.
Reminder: Choose your lowest balance and highest interest rate debt to pay down first. Once you pay off that debt, re-route that monthly payment to your next highest interest rate debt.
7. Set a Plan to Revisit Your Budget Regularly
As the year moves along you may or may not have areas of your budget that need to be adjusted. Consider scheduling a time at least every 6 months to review your budget with your significant other. Make adjustments for extra or reduced income, debt payoff plans for new or completed debt, and new savings goals.
While six months is the bare minimum these revisits should happen, having meetings once a month or every three months is a great way to make sure your budget is where you need and want it to be.
Remember it is not common for a single budget to work forever but don’t let that discourage you. By implementing these steps of staying in tune with your budget and revisiting it often, you will be able to quickly and efficiently adjust your budget as needed.
For help with budgeting click link below to sign up for my FREE Budgeting Email Course. This course walks you through every step of the budgeting process and will help you to create a budget that works for your family.